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CONSTRUCTION COST ANALYSIS––––––

INDUSTRIAL PROJECTS CENTRAL AND EASTERN EUROPE

This database includes a lot of projects of different sectors, from industrial and commercial to technological. However, as throughout the region of Central & Eastern Europe the industrial projects prevail, the majority of the data present-ed in this brochure is applicable to the INDUSTRIAL SECTOR.It should be noted, that the cost data contained in this document is indicative and cannot be used for clients’ budget-ing purposes. There are many factors

A construction cost analysis summarizes our knowledge of costs on the market across the construction sectors. It is developed based on Bilfinger Tebodin cost database created over years 2008 –2019 while working on hundreds of projects from start to finish and based on the actual prices from the market.

Construction cost analysis | Introduction

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Introduction

that influence the cost on the construc-tion market, such as a project size, tech-nology requirements, project location, greenfield/brownfield/extension etc.For the purpose of the elaboration of this analysis, the factors were simplified in order to achieve a sufficient benchmark for comparison.

Bilfinger Tebodin is an international consultancy and engineering company, part of Bilfinger Group since 2012. With its headquarters in the Hague, the Netherlands, Bilfinger Tebodin supports investors worldwide, from the earliest pre-investment stage up to commission-ing and maintenance of their projects. An extensive network of around 30 offices in 11 countries guarantees the knowledge of local markets and regula-tions. More than 3,200 consultants and engineers deliver the best international solutions to projects of various sizes and complexities. Collaborating with your team, we offer consultancy, engineering, process technology and management solutions. In Central & Eastern Europe region, Bilfinger Tebodin has offices in eight countries: Czech Republic, Slovakia, Poland, Romania, Hungary, Serbia, Russia and Ukraine.

Based on the data collected from bid-ding procedures within the last ten years and taking into account the current mar-ket situation, the following table shows the average prices in EUR per m² of GEFA (Gross External Floor Area). These costs include all construction costs i.e. cost of civil works, MEP works (HVAC, electrical, BMS), external works such as grading works, utility connections, roads and compacted areas. This is related to GEFA of all buildings.• Project cost is assumed within

a land plot. • Unit rate for m² of construction is

for greenfield projects and does not include process equipment cost.

For the cost estimate, we calculate the prices for production, warehousing or office areas over m² of floor space. The building height has only a minor influence on the price. We only take the building height into account in case of high-rise warehouses, storages or build-ings with unusual hights, when cranes or technology equipment are involved.It is also necessary to mention, that the final project price reflects a lot of factors, and all of them influence the construction cost: country, location, brownfield or greenfield, building type, installed technology, structure type, foundation and subsoil, equipment standards, actual situation on the con-struction market and others. The impact of the specific conditions is also very important, e.g. strengthens of frame

Sector breakdown | Construction cost analysis 3

Sector breakdown

structure due to seismic conditions, construction in floody area, archaeolog-ical findings. Moreover, the construction cost is influenced by the requirements of BREEAM/LEED certification or following FM Global, or other insurance company requirements.

SECTOR BREAKDOWN (Cost per m2)

The prices listed here are valid for 2019.

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Sector breakdown

EUR/m2 EUR/m2 EUR/m2

Sector Min Average Max

Automotive 560 890 1310

Food & Beverage 920 1390 2210

Warehouses 430 600 1060

Retail 980 1070 1350

Offices (shell & core) 690 870 1080

COST INCREASE IN 2018

After the years of 2006, 2007 and 2008, when construction prices in CEE region reached the highest levels, the construction market slowed down. Construction prices started to gradually increase again approx. in 2014; later on, the market experienced a robust growth in 2018. This has made 2018 the most expensive year since 2009. More details are provided on the following pages.

Construction cost analysis | Sector breakdown

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Although we have experienced a dif-ferent average price increase in each country, it should be noted that each market segment also behaves differ-ently. The changes described below are mainly focused on industrial buildings and plants.Prices are general and applicable throughout Central Europe.

CONCLUSION

The sector break-down analysis shows that the highest average costs of the listed segments are in the Food & Bever-age segment. This is driven by the high level of hygiene requirements and clean design, which influence, for instance, internal structures or finishes, and also effects costs for MEP services. The Automotive sector shows lower average costs than Food & Beverage. Here the main cost drivers are technol-ogy requirements e.g.: high floor loads, underground channels, heavy crane runways, acidity resistant screeds etc. It is no wonder that warehouses are the cheapest sector out of the analysed ones. They usually have basic HVAC and civil part demands, lower than those for production buildings.As for the Retail & Office sector, the level of costs depends on the building standard.

The cost ratio serves as a control of budgeted costs for each part of the project, and helps to estimate the overall investment costs. It also serves as an indicator of non-standard client requests.Please, see here the examples of a cost ratio for a hall-type factory with average (standard) technology requirements.

PROJECT COST RATIO

An important part of our analysis is also the prices ratio of project individual parts.A common industrial plant (excluding technology – process equipment) consists of main objects such as: production buildings, warehouses and office buildings. Furthermore, the necessary infrastructure, such as water, electricity, gas, roads, sewage, earthworks, etc., and small objects such as fencing, gatehouse, shelters, etc. and other works mainly consisting of other overhead costs, as well as site equipment. Those ‘other costs’ often include the detail design documentation of construction.

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Cost ratio | Construction cost analysis 5

Cost ratio

The basic breakdown is:• Main objects – 70 – 85%

construction costs;• Small objects, infrastructure and

other costs – 15 – 30%.

Please, find below the example of project cost ratio for a production plant (exclud-ing technology – process equipment).

■ Main buildings

■ Small objects

■ Infrastructure

■ Other works

Project cost ratio

80

3

152

The cost ratio shows us in detail the standard project cost allocation.For each sector, a partially different cost ratio is applicable, as well as for each type of production.

Construction cost analysis | Cost ratio

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BUILDING COST RATIO – INDUSTRIAL PROJECTS

A building cost ratio identifies the ratio between civil and mechanical works – HVAC (heating, ventilation, air condition-ing, etc.) plus electrical works. These prices include also the cost of utilities for technology – process equipment. Till 2017 there was a general rule for an approximate ratio between civil part and MEP (mechanical and electrical): approx. 60% to 40% for projects in CEE region, except for Russia. Meantime, in Russia it could be a 50/50 split between civil part and mechanical, electrical and plumbing. Due to a big civil part cost increase of, now the ratio inclines up to 70% for a civil part and 30% for MEP.

CIVIL COST RATIO – INDUSTRIAL PROJECTS

Going into details, we should consider the following 7 parameters which make up about 60 –70% of all construction civil costs:• Foundation,• Loadbearing structure,• Roof insulation,• Roof metal sheets,• Facade,• Floors – concrete,• Steel structures.

Civil cost ratio is split into these main sections.

■ Civil part

■ Mechanical part

■ Electrical part

Building cost ratio

68

17

15

■ Load bearing structure

■ Floor structure

■ Envelope of the building

■ Interior structures

■ Steel structures

Civil cost ratio

32

11

10

6

9

An element cost analysis is focused on industrial projects across the region. It is structured as per our standardized cost structure, which is used at Bilfinger Tebodin in Central & Eastern Europe for cost estimates and for a complete project evaluation.The costs are related to the total GEFA of the building.Please, find here the table of a basic breakdown with average prices for indi-vidual construction parts and a split of costs in % from the total project price. Prices are given in EUR without VAT.

MAIN BUILDINGS

CIVIL PART

A civil part includes all building costs, except for Building Services (MEP). Lifts as well as load bearing structures are included.The civil part is the most accurate and graspable for general calculations. It contains both the load-bearing structures of a building and the building envelope, flooring, interior finishing and other specifics of individual production plants, such as crane runways, chan-nels, pits, steel built-in or footbridges, pipe bridges, etc.

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Element Cost Analysis | Construction cost analysis 7

Element Cost Analysis

Load bearing structureLoad bearing structures include piling, foundation, supporting for construction excavation/pit (incl. bracing and slurry walls), vertical bearing structure such as columns, walls, horizontal bearing structures, – beams, trusses, bracings.Across the region of Central & Eastern Europe, the load-bearing structures have a vast range of pricing. This is related to a difference in prices, when using steel or prefabricated constructions and also to the current prices of the materials on particular markets. Till 2017 it was significantly cheaper to build a facility with a prefabricated construction in some CEE countries, nowadays the difference is minimal,

Project cost for automotive production plant

EUR/m2 % of % of of building building project

Project cost 1 027 – 100%

Main building 820 – 80%

Civil part 560 68% 55%

Load bearing structure 260 32% 25%

Floor structure 90 11% 9%

Envelope of the building 85 10% 8%

Interior structures 50 6% 5%

Steel structures 75 9% 7%

Mechanical part 140 17% 14%

Eletrical part 120 15% 12%

Small objects 30 – 3%

Infrastructure: 152 – 15%

Grading works 40 – 4%

Roads 45 – 4%

Water management 50 – 5%

Exterior elektrical distribution 15 – 1%

Gas distribution 2 – 0%

Other works 25 – 2%

although the steel structures have also become more expensive, not significantly however. When planning a prefabricated concrete construction, the utilization of the precast facilities and the longer delivery time should be taken into account.

Floor structureA floor structure includes the cost of the concrete floor and all layers, such as gravel subsoils, waterproofing, thermal insulation and dilatation. Special finish-es are usually included in the interior structures.The main item of this part is a concrete floor. If concrete is steel wired, the price is at a similar level with small deviations over the years. However, if your project implies a concrete floor with bound reinforcement, you should consider a significant increase in the price of the reinforcement and, thus, of the overall facility price.

Envelope of the buildingA building envelope includes the cost of

Construction cost analysis | Element Cost Analysis8

a facade, roof and openings (windows, doors, gates, skylights), and the associ-ated steel structures.These costs are effected by the price of facade panels, roof sheets and thermal insulation. As steel and thermal insula-tion are a very frequent commodity now and the cost of insulation has sharply in-creased, this has a significant influence on the total construction cost and also the construction schedule.

Interior structuresInterior structures include installation costs, floor and wall finishes, ceilings, interior windows, doors, elevators, etc.Speaking about the price increase, this part was not so extreme last year and the price was influenced by a labour price rather than the price of the mate-rial itself.

Steel structuresSteel structures include the cost of steel structures supplementing the individual building parts described above: for example, steel platforms, crane tracks,

steel structures for media, steel bridges, pipe bridges, etc.For a standard industrial hall, a portion of a steel cage is a significant item and its price depends on the steel price on the market. Within CEE countries, the steel price may differ mainly for Russia and Ukraine, where steel structures are relatively cheaper, and for Hungary, where they are expensive.

MECHANICAL PART

Mechanical part includes costs for water, sewage inside the building, sanitary ware, heating, ventilation, air conditioning, cooling, sprinklers inside the buildings (including cooling technol-ogy and compressed air, if applicable) and Building Management System (Instrumentation and Control mainly for HVAC).Average HVAC prices are considerably influenced by the building production technology, that makes its comparison across projects and countries more complicated. Generally, in Russia this

Element Cost Analysis | Construction cost analysis 9

part is proportionately more expensive than in other CEE countries.

ELECTRICAL PART

Electrical part includes all electro for a building itself and technology – a pro-cess part as low voltage – power supply, transformers, extra low voltage (weak current) such as fire alarm system, CCTV, IT, Security, artificial lighting, earthing and lightning protection.An electrical part conforms the same pattern as a mechanical part.

SMALL OBJECTS

This part contains small objects such as fencing, gatehouse, shelter, flagship, scales, small warehouses, foundations, sprinkler stations, water treatment etc.The amount and total impact of small objects on the total price depends on the project type.

INFRASTRUCTURE

GRADING WORKS AND LANDSCAPING

They include excavations, backfills, stabilisations, compactions to create a plain under the building, soft land-scaping (grass, trees, etc.). Earthworks/excavations are the types of works, which are very site specific and depend on soil conditions of each site. Prices for those works are also specific due to very high differences between the bids. It may happen, that in one country a client can receive bids with 100% price variance.

ROADS

This contains roads for trucks and cars, parkings, sidewalks and road signs.The price increase of the recent years has strongly effected this part of the project. Thus, roads are a relatively important part of the project price.

WATER MANAGEMENT

It includes prices for potable water supply, fire and utility water, sewage, rainwater, technological drainage, roads dewatering and retention tank.A retention tank is always an essential part. The total price of water manage-ment depends mostly on the land size, the length of connections, the number of objects and the area of roads.

Construction cost analysis | Element Cost Analysis

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EXTERIOR ELECTRICAL DISTRIBUTION

It contains high voltage connection, out-door low voltage distribution, outdoor lighting, diesel generator, low voltage distribution.The total price directly depends on the lengths of individual connections and the area of roads to be illuminated.

GAS DISTRIBUTION

It includes a gas connection and external gas distribution.

OTHER WORKS

Mainly it includes the costs of the site equipment and other costs of a con-tractor. At the same time, very often they contain the costs of detail design documentation.

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Unit rates | Construction cost analysis 13

The comparison of unit prices may be misleading because of huge changes on construction markets during the last 2 years. Therefore, old projects cannot be used for a comparison.Please, find below the comments for main building materials, where we have seen the biggest increase in price and which significantly impact the price of construction works:

MINERAL WOOL

It is a commodity, which is now in a great demand and its delivery may take a long time. The increase in average prices between 2016 and 2019 is about 40% in some countries.

Unit rates

PREFABRICATED CONCRETE

Prefabricated concrete has been significantly increased in price in Central Europe (except for Russia, Ukraine and Serbia). However, we may expect another increase to come also this year or next.The price increase between 2016 and 2019 is 60% on average.

REINFORCEMENT

Reinforcement steel represents a rate for supply and installation of steel rein-forcement rebars, used in situ concrete (piles, floor slabs, monolithic structures).Rates for reinforcement steel are very similar across the region except for Russia and Ukraine, where they are by approx. 20% lower. However, it should be noted that a steel rebar is one of the items that are very sensitive to commod-ity prices. The increase in average prices between 2016 and 2019 is about 40% (except for Russia and Ukraine).

Average price EUR

Items: Unit [CEE]

Concrete for monolithic structure m3 180

Steel reinforcement kg 1,1

Prefabricated structures m3 800

Wire-concrete for floor m3 140

Thermal insulation th. 220 mm for roof m2 27

Facade sandwich panels, approx. th. 160 mm m2 50

Steel structure kg 2,5

Exceptions price EUR

[Ru] [Ua] [Hu] [Ro] [Se]

0,8 0,8 1,5 1

500 500 500

200 90

20

35 35

1,5 1,5 4,1 2,0

STEEL STRUCTURE

Steel structures (supporting struc-tures) – represent a complete rate for supply and installation of supporting steel structures such as bracings, sup-porting structure for facade, platforms for technology equipment.The increase in average prices between 2016 and 2019 is about 10 –20%

MONOLITHIC CONCRETE

Concrete represents a complete rate for supply and installation of “in situ” concrete. Concrete is a commodity that holds its price throughout the construction decline and boom. It is mainly the price of labour, that has increased. The price of concrete constructions themselves is influenced significantly by the price of steel reinforcement.The increase in average prices between 2016 and 2019 is about 0 –10% for the material itself.

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Unit rates | Construction cost analysis 15

It is obvious from the table below that the price differences in Central & Eastern Europe countries are relatively minimal today.However, this was not the case until the first half of 2017, when there was a big percentage difference between the countries: prices in Russia could be 30 – 40% higher than prices in e.g. Serbia, or Romania, or Ukraine.The construction boom that started in Europe at the end of 2017 and lasts until now, has partially offset the price differences. Countries with the most un-dervalued prices like the Czech Republic, Slovakia, Romania, Serbia or Ukraine have reached the highest price increase. Prices in Poland, Hungary and Russia have also raised, but not so significantly.At the same time, as a consequence of the building boom, which hit CEE, the companies have a lot of work and are increasing their profits. This was also

Country price indexes

significantly reflected in the overall increase in construction costs, lack of interests in bidding and prolongated delivery times of some materials (mainly mineral wool and precast concrete).

In comparison with NWE (North - West Europe), the prices in CEE are still 20 – 50% lower.

Country price indexes

Czech Rep. 100%

Slovak Rep. 100%

Russia 105 –120%

Ukraine 85 – 90%

Romania 90 – 95%

Poland 100 –105%

Hungary 105 –110%

Serbia 85 – 90%

Construction cost analysis | Country price indexes

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Country price indexes | Construction cost analysis 17

PARTICULAR COUNTRIES

CZECH REPUBLIC AND SLOVAKIA

Price development in 2008 –2019 in the Czech Republic.Market price development was heavily influenced by the crisis and the associat-ed significant price drop in 2009. Mainly steel, prefabricated constructions, mineral wool and labour costs had the biggest impact on average prices. The average cost of construction reached 60%, as compared to the pre-crisis years of 2007 or early 2008, when the prices were very high.During 2010 and – early 2017, prices were stagnated and slowly raised only about 15% cumulatively over the past 7 years. The big leap in price came at the end of 2017 and during 2018, when the construction industry jumped 15 – 20% in comparison with the previous years. In other words, now in 2019 we are back to the average prices in 2007.The chart shows the development of average prices of the construction civil part for a hall-type industrial building.

RUSSIA

In Russia, the situation was slightly different during the past 10 years. In 2009, there was also a partial drop in market prices, but it is a 10 –15% decrease. In the following years there was a gradual raise in prices well above the 2008 level.

Currently, there is a rapid decrease in construction in Russia, which is the most remarkable in the regions. In large cities (Moscow, Ryazan, Vladimir) the decrease is not so evident, however, the trend is clearly visible.Today, some investors, especially for-eign ones, do not risk investing in new projects, in particular, for the reasons of a strict sanctions policy.The number of construction compa-nies that went bankrupt is constantly growing. About 20% of construction companies closed or suspended their activities in 2017 due to the upcoming amendments to the law on shared construction (housing construction), as well as due to the difficult economic situation, which led to a significant reduction in the volume of work in 2018.In 2018 prices for some building mate-rials were increased (in average around 10%). An increase in prices is also

Average prices on construction market for civil part of industrial halls in CR and SR (in CZK)

15 000

12 000

9 000

6 0002007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019

Construction cost analysis | Country price indexes

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expected in 2019 due to an increase in VAT, currency exchange rate, gasoline prices, salary, etc. As Czech and Polish construction markets were increased in 2018, the average unit prices for construction are at quite similar level as Russian ones. At the same time in Russia construction puts more overheads, profit, cost of bank guarantee and insurance, so the price finally should be higher than in Czech Republic or in Poland. Unit prices can be even lower, but GC put those fee on top – additional items.

UKRAINE

In 2018, the construction industry con-tinued to show a steady growth, taking into account the big breakthrough that took place in the region a year before. In 2018, a number of important changes was adopted to simplify activities in construction. The state construction norms on urban planning, designing schools, kindergardens, streets and roads, which are so important for the industry, came into effect. All this positively influenced the construction industry development.Since the middle of 2017 and during 2018 and 2019, prices for construction materials have increased in aver-age 20%.

POLAND

In Poland, there was also an approxi-mately 10% decrease in 2009, but 2010 was already flat and 2011 appeared to be about 5% higher. Subsequently, there was a slight decrease and fluctuations in prices until 2017. In 2018, there was a similar jump as in the Czech Republic, an average 10 –15% increase of prices. Poland and Czech Republic are now on a similar price average level.

ROMANIA

There was also a price drop of about 20% in 2009 and prices were returned to pre-crisis levels from 2011 to 2014. Since that time the market has continu-ally been going up.

SERBIA

In Serbia, the price is currently lower by about 20% than in e.g. Czech Republic, but due to the construction boom going throughout Europe and due to the planned large-scale constructions, prices are expected to be risen to 10% below Czech, Polish or Russian price levels.

HUNGARY

The Hungarian market experienced a fall in 2016 and has been risen steadily since then, like in other CEE countries. Compared to other countries, the average prices in Hungary are above

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Country price indexes | Construction cost analysis 19

CEE average ones. Therefore, Hungary can be considered the second most expensive country in CEE after Russia in this respect.

SUMMARY AND TRENDS

The significant price increase in 2018 was caused by a major increase in the prices of some materials such as prefab-ricated constructions, steel structures or reinforcement and mineral wool in

some countries. Furthermore, there is an increase in the price of labour and services and due to the surplus of demands for construction activities, the profit of construction companies is also incorporated into the price.We can also say that the market has been “restored”. As average prices exceed ones of the years before the construction crisis (2007), unless other unexpected events occur, we cannot expect a large correction in 2019, in opposite the prices in 2019 are still continuously going up.But we can see some indications, that contractors are more willing to offer now in 2019 and that they do not have such contracted work as they had a year ago. Some correction of prices can come in the near future.In comparison with the construction market situation till summer 2017, the actual CEE average costs can be 10 –30% higher, depending on the country.External factors like a slow-down of German economy, sizing down or stopping projects because of Brexit etc. might influence the volume of investments in Central & Eastern Europe region with an impact on construction price development in 2020.

Conclusions

The analysis shows that there are many similarities within CEE region in terms of costs.In most cases, the detailed data in this document are based on industrial buildings.The only reliable approach to establish proper costs is to follow the costs from early design stages by preparing relevant cost estimates at each design level. A high level of details of the de-sign means less uncertainty and better accuracy of a cost estimate. The cost estimate is usually done up to the stage of a building permit design and starting from a concept design.The proper cost management during the preconstruction phase along with well-prepared procurement strategy for selection of one or more contractors ensures the best contracted prices achievable on the market for the client.

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Conclusions | Construction cost analysis 21

Construction cost analysis | Sources

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SOURCES & CONTACT

• Internal cost database and know how;

• Cost data and information provided by cost managers from CEE countries.

The cost analysis – 2nd edition was compiled by Lucie Kybalová from Bilfinger Tebodin.For more details regarding cost analysis, please contact Lucie Kybalová at:lucie.kybalova@bilfinger.com

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Word from Clients | Construction cost analysis 23

Word from Clients

Solar Turbines is greatly appreciative of the efforts and professionalism of the Bilfinger Tebodin Cost Control team. The team has been a tremendous asset for Solar to manage costs on the project. Excellent communication was maintained throughout the project and all proposals from the General Contractor were analyzed to ensure they are accurate and in accordance with the project scope. There have been numerous occasions where Bilfinger Tebodin efforts have led to cost reduc-tions as well. In addition, cost reports are provided monthly and all invoices and change orders are provided in a very timely manner. I have not yet worked a project with such expertise in this area before, it is a real pleasure. David Simon, Solar Turbines, Program Manager

We appreciate Tebodin comprehensive approach during procurement and also during construction, where hands on construction management and cost control on site helped us to complete the project on time and within our budget. Pierre Thompson, Kiswire

Expertise and knowledge of Costs across different regions was one of the reasons why we chose Bilfinger Tebodin for indepth cost analysis of our projects. This cost analysis helped us to find areas where to focus with Value Engineering and Cost saving measures for future projects. Confidential Client Food and Beverage Industry

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